This month you may be thinking more about the start of the school year than the start of tax season. But getting your recordkeeping act together now can help reduce your stress when it’s time to file your taxes.
How?
By beginning to organize your receipts and records now, you’ll have your paperwork at hand when it’s time to begin preparing your taxes. You’ll be able to find the transactions you need when completing your tax forms. And those transactions could help reduce your tax bill.
Plus, keeping well-organized records also ensures that you’ll be able to answer questions if the IRS has questions about your tax return in the future.
So what records should you keep to support your tax deductions—this year and in the future? Follow these guidelines for individuals and small-business owners.
For Individuals
The IRS says that individual taxpayers should usually keep the following records supporting items on their personal tax returns for at least three years:
- Bills
- Credit card and other receipts
- Canceled, imaged or substitute checks or any other proof of payment
- Any other records that support deductions or credits you claim on your return
You should also keep records relating to property until at least three years after you sell or otherwise dispose of the property. For example, keep records of:
- A home purchase
- Home improvements and energy upgrades
- Stocks and other investments
- Individual retirement arrangement transactions
- Rental property records
For Small-Business Owners
You need receipts to substantiate your income and your expense. The New Jersey State Society of Certified Public Accountants offers these guidelines for maintaining your business records.
Keep permanently
- Balance sheets, profit and loss statements, journal entries, general ledgers, and financial statements
- Check registers, cash disbursements, and receipt records
- Income tax returns, payroll tax returns, and sales tax returns
In addition, you should retain all corporate records permanently. Also, all fixed asset records, such as your business property register, depreciation schedules, property appraisals, and plans and blueprints, must be retained permanently.
Keep for seven years
- Accounts payable and accounts receivables
- Bank statements and reconciliations
- Vendor invoices and purchase orders
- Petty cash records and expense reports
- Charge and cash sales slips
Keep for three years
- Bank deposit slips and budgets
Depending on the number of employees you have and employee turnover, human resources and payroll records can be abundant and overwhelming. However, retaining these records can help protect your business if an employee dispute arises. Because of the extensive nature of employee records, talk to your tax professional about the appropriate record retention period.
AFS Can Help
Need help with your recordkeeping? AFS offers these benefits just for you:
- QuickBooks financial software. Organize your financial information quickly and easily. AFS Members save 20 percent and get free shipping on QuickBooks Pro.
- A-Systems Accounting & Business Management Software. AFS Members enjoy 50-percent off the retail price of A-Systems comprehensive accounting/business management software for small business. This software provides smaller companies with business management tools that monitor operating costs, do financial reporting and more.
- ProTax. AFS Members have access to certified public accountants who can answer all of your tax questions at no additional charge. Through the AFS website, the ProTax CPAs offer complete and confidential answers to your questions within two business days.
(Posted September 2010)
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